reading pulse from rotary dialer

hi,
I was trying to read the number of on/off pulses from a rotary dialer. I found some script from Tom Igoe, and it almost works...as I can count the number of reads from serial to corresponds with the number I dial on the rotary dialer. I have no idea how this code is exactly working...can someone help?

/*
/*
 Pulse_in
 by Tom Igoe
 
 Reads the values from a Memsic 2125 2-axis accelerometer.
 In order to do so, uses a function called pulseIn, which reads 
 the width of a pulse on a pin.
 
 Created 11 Feb. 2006
 
 */

int ledPin = 13; // choose the pin for the LED
int inPin = 7;   // choose the input pin (for a pushbutton)
int val = 0;     // variable for reading the pin status
int p;

// Function prototypes:
int pulseIn(int inPin, int desiredState);

void setup() {
  beginSerial(9600);
  pinMode(ledPin, OUTPUT);  // declare LED as output
  pinMode(inPin, INPUT);    // declare pushbutton as input
  printString("Starting\r\n");
}

void loop() {
  p = pulseIn(inPin, HIGH);    // read pulsewidth 
  printString("got a roll\n");
  printInteger(p);            // print p value
  printString("\r\n");           // print return character and newline character
val = digitalRead(inPin);  // read input value
  if (val == HIGH) {         // check if the input is HIGH 
    digitalWrite(ledPin, HIGH);  // turn LED on
  } else {
    digitalWrite(ledPin, LOW);  // turn LED off
  }
}

/////////////////////////////////////////
/*
  pulseIn function.  reads the width of a pulse on a pin.
 Takes a pin number and the desired state, HIGH or LOW.
 Watches for the pin to change from the non-desired state to 
 the desired state, then counts loops until the pin changes
 back again.
 
 */
int pulseIn(int inPin, int desiredState) {
  int count = 0;        // local counter
  int finalCount = 0;   // final number of loops the pulse takes
  int pinState;         // state of the pin you're watching        
  int lastState = desiredState;   // place to store the previous state of the pin
  int difference = 0;

  while (finalCount <= 0) {
    pinState = digitalRead(inPin);
    difference = pinState - lastState;

    if ((difference > 0) &&(desiredState == HIGH)) {
      // start counting pulses
      count++;
    }

    if ((difference < 0) &&(desiredState == HIGH)) {
      // stop counting pulses
      finalCount = count;
      count = 0;
    }

    if ((difference < 0) &&(desiredState == LOW)) {
      // start counting pulses
      count++;
    }

    if ((difference > 0) &&(desiredState == LOW)) {
      // stop counting pulses
      finalCount = count;
      count = 0;
    }

    // save the state of the pin as the old state,
    // so we can get a new state to compare it to:
    lastState = pinState;
  }
  // you're done.  Return the final count:
  return finalCount;
}

http://www.tigoe.net/pcomp/code/archives/arduino/000748.shtml